How to Unload Your 403B


Unloading your employer-sponsored 403b retirement plan means you don't want to be part of the employer's plan anymore. The reason might be poor performance of investment options, distrust of employer fiduciary responsibility or the desire to get funds you need for some reason. Unloading it might mean cashing out and taking the funds or rolling them over into a new plan. Liquidating a 403b has tax consequences, while rollovers have service restrictions. Look at both options before making a final decision.

Liquidating a 403b

Call your plan administrator at the number located on your statement. Request a distribution form.

Review the tax consequences of the distribution. All funds taken out are added to annual income when filing personal tax returns for the year. If you aren't yet 59 1/2 years of age, you will also pay 10 percent in penalties on the distribution; speak with a tax adviser if you are unsure of the tax liabilities.

Fill out the distribution paperwork, completing your personal information section with your name, current address and telephone number. Write in the amount you want taken out or state "100%" if you want a complete liquidation.

Sign and submit the form, returning it to your plan administrator at the address provided on the paperwork. A check will be sent within five to seven business days after processing the paperwork.

Rolling Over a 403b

End employment. You cannot rollover a 403b is you are still working for the employer.

Call the plan administrator and request a rollover package.

Open a new self-directed IRA account to receive the rollover assets. Obtain the new account number and custodian's contact information.

Fill out the rollover paperwork using the new custodian's information. Many IRA custodians will fill the paperwork out for you as a free service to ensure the paperwork is properly completed. Sign the forms and submit the rollover paperwork to your former employer to conduct the rollover.

Wait approximately six weeks for the rollover to fund the new IRA.

Tips & Warnings

  • Certain early distributions from a 403b qualify for a penalty exception. If you use $10,000 for a first home purchase, use funds to pay college expenses or to prevent foreclosure or eviction, you qualify for a waiver. Speak with a tax adviser regarding all possible waivers and properly filing your tax return to get credit for them.

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